Bitcoin is funny money

[seattlecyclone]

That's a great chart but it looks like they've left Bitcoin off the list?  Do you have any idea why they would have done that?

Bitcoin didn't exist at all for half that chart's history, and only in the past six months did it have a market cap more than 1% of the S&P 500. The chart also omits gold and hedge funds and frozen orange juice concentrate futures. They don't track everything, nor do they try.

[lifeanon269]

That's a silly way to ignore one of the basics of economics: opportunity cost. There's limited downside to putting 8k into anything. But you can't put 8k into everything.

Either way, this entire discussion misses the entire point. Out of all the arguments you could make against bitcoin, opportunity cost is NOT one of them. In fact, opportunity cost would be the last argument I'd bring up. It is the best performing asset over the last decade hands down. Even a portfolio of 1% bitcoin and 99% cash would yield you both higher returns and less risk than a portfolio 100% in an S&P500 index. Opportunity cost is just really not a great argument. There are a lot of benefits to holding some bitcoin and there are many ways that you can also reduce any downside risk you might carry. It has near zero correlation to just about every major asset class out there (S&P500, gold, oil, bonds, emerging currencies, real estate, BoA, Apple, and Tesla [1]). I just can't think of a good opportunity cost argument to be had here and the discussion above strayed from attempting to make one, IMO. What's the opportunity cost of not holding any bitcoin at all though? ...Quite a lot apparently.

[1]: https://research.ark-invest.com/hubfs/1_Download_Files_ARK-Invest/White_Papers/ARKinvest_091729_Whitepaper_Bitcoin_II_An%20Investment.pdf

[StashingAway]

That's a silly way to ignore one of the basics of economics: opportunity cost. There's limited downside to putting 8k into anything. But you can't put 8k into everything.

Either way, this entire discussion misses the entire point. Out of all the arguments you could make against bitcoin, opportunity cost is NOT one of them. In fact, opportunity cost would be the last argument I'd bring up. It is the best performing asset over the last decade hands down. Even a portfolio of 1% bitcoin and 99% cash would yield you both higher returns and less risk than a portfolio 100% in an S&P500 index. Opportunity cost is just really not a great argument. There are a lot of benefits to holding some bitcoin and there are many ways that you can also reduce any downside risk you might carry. It has near zero correlation to just about every major asset class out there (S&P500, gold, oil, bonds, emerging currencies, real estate, BoA, Apple, and Tesla [1]). I just can't think of a good opportunity cost argument to be had here and the discussion above strayed from attempting to make one, IMO. What's the opportunity cost of not holding any bitcoin at all though? ...Quite a lot apparently.

[1]: https://research.ark-invest.com/hubfs/1_Download_Files_ARK-Invest/White_Papers/ARKinvest_091729_Whitepaper_Bitcoin_II_An%20Investment.pdf

It doesn't miss the point. It IS the point. Hindsight is 2020, so using that as a means to justify your portfolio puts you in line with most financial scammers (as well as the greats). Basically, it can't account for survivorship bias.. There was a time when beanie babies would outperform your entire portfolio.

I am a bit disappointed in bitcoin/crypto. I have various wallets with some funds... I want to spend it because I was hoping it would be currency. It's so unstable that it doesn't lend itself toward that mechanism. Bank transfers are much better in most of the developed world. Right now it's just a speculation machine.

If you have bitcoin, are you actually going to sell/spend it? Most people who are pushing the "making money on crypto" are market timing; selling highs and buying lows, etc. If I have 8k and put it into bitcoin, then I can easily double or triple that in a year at this rate. But here's the problem: if I sell, I'm out of the game. So my opportunity cost is that my $ is tied up in an asset that I don't want to sell. Or I can buy some pavers and grill and make a patio and enjoy my backyard. For long term investment, it is best to diversify, so some in crypto makes sense (like I have). But if crypto starts at 1% of my portfolio and then grows to 10%, the general diversification advise would be to re-balance and sell 90% of it... which puts you back out of the game, so to speak.

In other words, it's no different than timing the market; tulips, beanie babies, enron, (the failed ones), apple, tesla, etc. Success isn't proof of wise decisions with the market. It's only proof of variability.

 

[Juan Ponce de León]

^^ Hear the folks?  The best argument against bitcoin is that the investment grows so much that you then have to sell in order to rebalance your portfolio or enjoy the gains by converting them into luxury items.  This is the main problem with crypto, it just makes so much gain that it doesn't work as an investment!  LMAO!

[lifeanon269]

It doesn't miss the point. It IS the point. Hindsight is 2020, so using that as a means to justify your portfolio puts you in line with most financial scammers (as well as the greats). Basically, it can't account for survivorship bias.. There was a time when beanie babies would outperform your entire portfolio.

I am a bit disappointed in bitcoin/crypto. I have various wallets with some funds... I want to spend it because I was hoping it would be currency. It's so unstable that it doesn't lend itself toward that mechanism. Bank transfers are much better in most of the developed world. Right now it's just a speculation machine.

If you have bitcoin, are you actually going to sell/spend it? Most people who are pushing the "making money on crypto" are market timing; selling highs and buying lows, etc. If I have 8k and put it into bitcoin, then I can easily double or triple that in a year at this rate. But here's the problem: if I sell, I'm out of the game. So my opportunity cost is that my $ is tied up in an asset that I don't want to sell. Or I can buy some pavers and grill and make a patio and enjoy my backyard. For long term investment, it is best to diversify, so some in crypto makes sense (like I have). But if crypto starts at 1% of my portfolio and then grows to 10%, the general diversification advise would be to re-balance and sell 90% of it... which puts you back out of the game, so to speak.

In other words, it's no different than timing the market; tulips, beanie babies, enron, (the failed ones), apple, tesla, etc. Success isn't proof of wise decisions with the market. It's only proof of variability.

It's not hindsight 20/20. It is a delusion that people continue to disregard an asset that is valued at over $1 trillion dollars and continues to be the best performing asset for over a decade as something that is just going to go away tomorrow. Is it really survivorship bias when its been a decade running? Seems like the bias is among those that continue to conclude that its a fad without any solid argument based in reality. Continuing to disregard it as a fad is the biggest mistake that no-coiners make. Anyone that relegates bitcoin into a comparison between tulips and beanie babies immediately loses credibility in a genuine discussion on the matter.

If I have bitcoin am I actually going to spend it? Yes, I do. All my online purchases are made with bitcoin. Almost all of them are made using the lightning network to spend it directly with the merchant or through services like Moon, Fold, Bitrefill, etc. Amazon, my grubhub/doordash orders, anything I get online delivered; I make all those orders using bitcoin so that I don't need to have any credit cards exposed online. It provides me much greater data privacy and I love that.

Your argument that if you sell you're out of the game doesn't really make any sense at all. What's the actual argument you're trying to make by stating such? What do you mean by "Most people who are pushing the "making money on crypto" are market timing."? I don't market time at all and I would say that most bitcoin holders advocate for the opposite. There is a reason why there is a "HODL" meme that has widespread use in the community. It's because they advocate that people buy and hold as a long term investment instead of trying to time the market. It's literally the exact opposite of market timing. There are even services like SwanBitcoin that allows you to make regular automatic purchases and they don't even allow you to sell. It's just an easy way to DCA your purchasing to set and forget.

Also, in all honestly (as someone who's worked in the financial industry for 15+ years), even in the developed world I don't think bank transfers are as easy as making a bitcoin transaction. Services like Venmo, PayPal, and CashApp are great at these things. However traditional financial institutions lag far behind these services when it comes to peer to peer transacting. There are a few services like Zelle and PopMoney that have tried to bridge that gap, but their penetration in the market lags and even then (at least with PopMoney) it still takes a day to transfer funds. On top of that these services have pretty restrictive transfer limits (just a few thousand dollars a month) that makes them pretty limited in what they can do. This is the area that is ripe for disruption with traditional financial institutions. It is why Venmo, PayPal, and CashApp have had such success in getting the market penetration they've made so far, but in the end I think cryptocurrencies with their open network nature will win this market.

So my opportunity cost is that my $ is tied up in an asset that I don't want to sell.

Huh?? This doesn't even make sense. I don't think you understand what opportunity cost is...

[JetBlast]

I don't market time at all and I would say that most bitcoin holders advocate for the opposite. There is a reason why there is a "HODL" meme that has widespread use in the community. It's because they advocate that people buy and hold as a long term investment instead of trying to time the market. It's literally the exact opposite of market timing.

The meme has widespread use because the community loves seeing the price of bitcoin rise, which only happens if there's more buying interest than selling interest.  It's in their financial interest if everyone else holds their coins instead of selling.  Just like reading r/wallstreetbets when GameStop was sent into the short squeeze.  People gave high minded reasons about remaking the system, taking down wall street fat cats, etc... but it was all naked financial self interest.

[lifeanon269]

The meme has widespread use because the community loves seeing the price of bitcoin rise, which only happens if there's more buying interest than selling interest.  It's in their financial interest if everyone else holds their coins instead of selling.  Just like reading r/wallstreetbets when GameStop was sent into the short squeeze.  People gave high minded reasons about remaking the system, taking down wall street fat cats, etc... but it was all naked financial self interest.

No, the meme came about because of a guy who mis-typed "hold" after admitting he sucks at day trading.

https://bitcointalk.org/index.php?topic=375643.0

So rather than day trading and trying to time the market, he decided to HODL. The existence of the HODL meme is in direct contrast to trying to time the market. It was around as a meme well before r/wallstreetbets took off virally earlier this year. You're applying too much thought about "remaking the system" when it is just a simple meme the espouses holding bitcoin for the long term rather than trying to time the market (which is what my original point was). And yes, that's in self interest...isn't that the point of most personal investments?

[StashingAway]

Huh?? This doesn't even make sense. I don't think you understand what opportunity cost is...

You should jump into the Tesla thread: they are saying that people who aren't invested in Tesla are deluded and that the .5T net worth of the company proves that it's a valuable asset. Its the exact same stuff. It's been the same stuff since the history of investing. From a more geological time scale, there is no difference.

Re: Opportunity cost.

I can put $8K into bitcoin. That 8K could also go toward something else. Like a patio that I can actually enjoy today. Or tuition, which is a different kind of investment in my future. Or a house that I am buying this month, which I will need a down payment on so that I may live with a roof over my head. Or Tesla. Those are all opportunity costs to having $ in bitcoin.

[StashingAway]

The meme has widespread use because the community loves seeing the price of bitcoin rise, which only happens if there's more buying interest than selling interest.  It's in their financial interest if everyone else holds their coins instead of selling.  Just like reading r/wallstreetbets when GameStop was sent into the short squeeze.  People gave high minded reasons about remaking the system, taking down wall street fat cats, etc... but it was all naked financial self interest.

No, the meme came about because of a guy who mis-typed "hold" after admitting he sucks at day trading.

https://bitcointalk.org/index.php?topic=375643.0

So rather than day trading and trying to time the market, he decided to HODL. The existence of the HODL meme is in direct contrast to trying to time the market. It was around as a meme well before r/wallstreetbets took off virally earlier this year. You're applying too much thought about "remaking the system" when it is just a simple meme the espouses holding bitcoin for the long term rather than trying to time the market (which is what my original point was). And yes, that's in self interest...isn't that the point of most personal investments?

That's not a fair representation of JetBlast's points. He wasn't talking about the origins of the meme, he's talking about it's current usage. And I tend to agree with him: it's said as a rally cry, often tongue in cheek. It's popular because people are having fun throwing money at the market. It keeps everyone playing, the same for any hobby.

Some people are experts and really, really good at what they do in their free time. I belong to motorcycle forums; they have the same kind of camaraderie. Some people build a unique bike from the ground up and know more than most mechanics do (similar to how there are many smart people in WSB and crypto). And some are novices. Some actually are professionals (those who develop and speak about crypto). But all share a jargon with each other that is fun and recognizable. It's analogous to any hobby. Some people feel that motorcycles are the answer to traffic, and thus many of the world's problems. Some people think that everyone should sew their own clothes. And some think that using non-fiat currency is the answer to to everything.

There's nothing wrong with this: in fact I'd say it's one of the essential characteristic of what it means to be a human! But it seems that sometimes things get taken a bit too seriously and then it's difficult to see the forest for the trees.

[lifeanon269]

That's not a fair representation of JetBlast's points. He wasn't talking about the origins of the meme, he's talking about it's current usage. And I tend to agree with him: it's said as a rally cry, often tongue in cheek. It's popular because people are having fun throwing money at the market. It keeps everyone playing, the same for any hobby.

Some people are experts and really, really good at what they do in their free time. I belong to motorcycle forums; they have the same kind of camaraderie. Some people build a unique bike from the ground up and know more than most mechanics do (similar to how there are many smart people in WSB and crypto). And some are novices. Some actually are professionals (those who develop and speak about crypto). But all share a jargon with each other that is fun and recognizable. It's analogous to any hobby. Some people feel that motorcycles are the answer to traffic, and thus many of the world's problems. Some people think that everyone should sew their own clothes. And some think that using non-fiat currency is the answer to to everything.

There's nothing wrong with this: in fact I'd say it's one of the essential characteristic of what it means to be a human! But it seems that sometimes things get taken a bit too seriously and then it's difficult to see the forest for the trees.

I agree with you in regards to camaraderie, but my counterpoint was that I feel that in spirit of its origins, it is still much more commonly used as a counter to timing the market. Whenever you hear someone tell someone to just HODL, they're telling them to stop trying to time the market and just buy and hold for the long term. That's precisely the point of the message of the meme; contrary to the original argument that was being made by yourself which was:

Most people who are pushing the "making money on crypto" are market timing; selling highs and buying lows, etc.

I just don't think that's an accurate representation. That's not to say there aren't a lot of people who are out there pushing it as a get rich quick scheme, but I would say that a majority involved in the bitcoin community are those that truly want to push the technology forward and see it more from a long-game perspective rather than a day trading one.

[GuitarStv]

I just don't think that's an accurate representation. That's not to say there aren't a lot of people who are out there pushing it as a get rich quick scheme, but I would say that a majority involved in the bitcoin community are those that truly want to push the technology forward and see it more from a long-game perspective rather than a day trading one.

Then what's the hangup with bitcoin?  It's not the most technologically advanced cryptocurrency, nor is it the most forward looking technology in the sector.  From a long-game perspective, it's main benefit seems to have been only that it was first and has name recognition.

[StashingAway]

I agree with you in regards to camaraderie, but my counterpoint was that I feel that in spirit of its origins, it is still much more commonly used as a counter to timing the market. Whenever you hear someone tell someone to just HODL, they're telling them to stop trying to time the market and just buy and hold for the long term. That's precisely the point of the message of the meme...

Hmmm. This might be a perception issue, then. The meme as I interpret it (and use it myself, I do participate in various crypto forums), is often used tongue in cheek or in ambiguous ways intentionally. It works because the original intent was the basic market advice, but it can be applied in many ways like "pull yourself up by your bootstraps", where it could be serious or not depending on the circumstances that it is used. Sort of a Poe's law type of thing. But that's my interpretation.

That's not to say there aren't a lot of people who are out there pushing it as a get rich quick scheme, but I would say that a majority involved in the bitcoin community are those that truly want to push the technology forward and see it more from a long-game perspective rather than a day trading one.

Most people that I personally come across who are trying to tell me the benefits of bitcoin quickly and prominently tell me how much money can be made in the space. I know that's not the baseline point of the technology, and I'm not in a country with destabilized currency lie Venesuela. But you can't tell me that the most exciting and talked about aspect of crypto is how much money there is in it. I have this conversation quite often, and I stand by my guns here... people trying to get others into the space will say things like, "I funded my vacation by selling some bitcoin," etc. This buying and selling only mathematically works from market timing. It's kind of a personal sticking point for me (but not directed at you, perhaps it's just me trying to figure it out).

[Telecaster]

But you can put 8k into the best performing asset of the last decade.  That's probably a good place to start.

I would say a better place to start would be to but $8K into the best performing asset of the next decade. 

[lifeanon269]

Then what's the hangup with bitcoin?  It's not the most technologically advanced cryptocurrency, nor is it the most forward looking technology in the sector.  From a long-game perspective, it's main benefit seems to have been only that it was first and has name recognition.

I don't think there is any "hangup" with bitcoin. I would say this is a bit of a myth in regards to bitcoin not being technologically advanced or forward looking. That's generally a description that comes from alt-coins that try to position themselves as "the next bitcoin" by saying they have technological improvements over bitcoin as their main selling point. Generally they're trying to sell snake oil as there is very little reason to ever own 99.9% of cryptocurrencies out there.

Yes, bitcoin moves slowly and deliberately because it has a $1+ trillion market sitting on its shoulders. You can't move fast and break things when an industry this large depends on it. You can't just implement any change in the network since what gives bitcoin its value is its strong security and consensus that is anti-fragile and resistant to attack (something no other cryptocurrency can claim). Even with changes that have widespread support from the network such as Taproot has a hard time finding consensus in how to even agree upon implementing it (LOT=True versus LOT=False).

That being said, there are a lot of technological advancements being made with it that go unnoticed. Lightning Network was implemented as a side chain after the Segregated Witness upgrade that allows for scalability and its growth has been exponential over the last couple years. Blockstream's federated sidechain Liquid was implemented on mainnet and as seen some growth with some exchanges and some NFTs have been implemented on it as well. Numerous implementations of coinjoin networks have been implemented as a means to improve privacy. Neutrino has been released that allows for a more lightweight implementation of verifying the blockchain. Schnorr signatures are being worked on to improve privacy and further refine signature aggregation. Microsoft just released their live implementation of a new decentralized identity service that runs on the bitcoin network called ION. This will greatly help improve data privacy and identity ownership on the internet. Mining improvements with things like BetterHash and StratumV2 help improve mining decentralization. There are DAOs implemented on the bitcoin network like the Bisq decentralized exchange that allows for peer-to-peer exchanges without requiring KYC. The reality is that while it is difficult to make changes in the base layer of bitcoin because of its anti-fragile security, it is actually relatively easy to implement new technologies as sidechains or other layers in the protocol that don't require mass consensus to implement. This is where real-world feature sets will be implemented anyway.

This is just the tip of the iceberg as far as the technology improvements taking place on the bitcoin network. The truth of the matter is that the reason that alt-coins push the idea that "bitcoin is old tech and we have better tech and will replace it" narrative is because that's the only thing the can say to try and overcome bitcoin's 1st mover advantage and supreme network effect. At the end of the day, in order to overcome an incumbent's superior network effect, a competitor must be 10x better, but no alt-coin is 10x better than bitcoin. When it comes down to it, anything an alt-coin can do or any idea that is come up with will simply be implemented on the bitcoin network as well since that is where the security is.

[StashingAway]

But you can put 8k into the best performing asset of the last decade.  That's probably a good place to start.

I would say a better place to start would be to but $8K into the best performing asset of the next decade.

Exactly. Or put 8K into the best performing asset of the next week. Then sell and do it again the following week, ad nauseum.

[EverythingisNew]

Cryptocurrency is not legal US tender. The only legal tender in the US is the US dollar in all forms. Cryptocurrency will never become mainstream because the US government will shut it down. We already have laws that discourage businesses from accepting foreign currency. To accept foreign currency you have to record the person’s government ID information and keep the transaction record for a certain number of years. Your business can be accused of money laundering, so it’s very rare in the US for companies to go through this trouble. Very rare to find a company that accepts Euros or Pesos in  the US. The same will be true for cryptocurrency. It’s even worse because cryptocurrency is not legal tender anywhere!

[Juan Ponce de León]

Cryptocurrency is not legal US tender. The only legal tender in the US is the US dollar in all forms. Cryptocurrency will never become mainstream because the US government will shut it down. We already have laws that discourage businesses from accepting foreign currency. To accept foreign currency you have to record the person’s government ID information and keep the transaction record for a certain number of years. Your business can be accused of money laundering, so it’s very rare in the US for companies to go through this trouble. Very rare to find a company that accepts Euros or Pesos in  the US. The same will be true for cryptocurrency. It’s even worse because cryptocurrency is not legal tender anywhere!

S&P500 stocks are not legal US tender either but there's still a lot of money to be made out of them.  Don't make the mistake of thinking that the ability to buy a cup of coffee with bitcoin has anything to do with its performance as an investment.  The last thing most bitcoin holders want to do with their bitcoin is spend it anyway.

[lifeanon269]

Cryptocurrency is not legal US tender. The only legal tender in the US is the US dollar in all forms. Cryptocurrency will never become mainstream because the US government will shut it down. We already have laws that discourage businesses from accepting foreign currency. To accept foreign currency you have to record the person’s government ID information and keep the transaction record for a certain number of years. Your business can be accused of money laundering, so it’s very rare in the US for companies to go through this trouble. Very rare to find a company that accepts Euros or Pesos in  the US. The same will be true for cryptocurrency. It’s even worse because cryptocurrency is not legal tender anywhere!

Legal tender is just when a jurisdictional court requires that a form of money be accepted as a form of payment for a monetary debt. That doesn't stop two parties from being able to exchange goods using whatever the two parties agree upon. Obviously laws varying in various countries, but being labeled as legal tenders isn't what determines whether or not two parties can agree to use a form of money or not. Here is a breakdown of where bitcoin is legal and not:

https://en.wikipedia.org/wiki/Legality_of_bitcoin_by_country_or_territory

It has pretty good widespread legality, especially in democratic nations. The argument that bitcoin is going to be banned by governments gets weaker by the day. You now have Coinbase going public on April 14th and is set to become one of the largest financial institutions in the country. The industry of bitcoin is a part of our economic fabric now. You have an SEC commissioner (Hester Pierce) saying that a delayed bitcoin ETF has consequences and that we're overdue for one. There are over a dozen ETF proposals filed with the SEC currently. It's only a matter of a short time before one is approved. The US is simply not in a position to legally outlaw something like bitcoin (it's just information after all) as it would present a whole host of 1st amendment violations. Especially with an extremely conservative leaning supreme court. There is also no precedent for such a move.

Also, the gold buyback that took place in the early 1930's was done in order to cause inflation so that they could later raise the price of gold under the Gold Reserve Act. We're in a completely different economy at the moment and there just isn't the capital available for such a buyback today without causing massive inflation. The threat in today's economy is inflation, so a buyback would be the exact opposite of a policy the government would want to implement.

Put simply, the window to ban bitcoin by the US was closed a long time ago. Bitcoin is a part of our economy now and it is only going to get more and more intertwined as more and more products and industries develop in the space. All of the biggest institutions have some sort of exposure to bitcoin now and that exposure is growing by the day. Also, if the US is permitting bitcoin and growing the industry like it is, then from a global competitive standpoint, other allied democratic countries are going to want to allow bitcoin and compete in the industry as well. Game theory is going to be a force that ensures bitcoin is widely accepted across the globe.

[GuitarStv]

Then what's the hangup with bitcoin?  It's not the most technologically advanced cryptocurrency, nor is it the most forward looking technology in the sector.  From a long-game perspective, it's main benefit seems to have been only that it was first and has name recognition.

I don't think there is any "hangup" with bitcoin. I would say this is a bit of a myth in regards to bitcoin not being technologically advanced or forward looking. That's generally a description that comes from alt-coins that try to position themselves as "the next bitcoin" by saying they have technological improvements over bitcoin as their main selling point. Generally they're trying to sell snake oil as there is very little reason to ever own 99.9% of cryptocurrencies out there.

OK.  Non-bitcoin crypto is snake oil, and bitcoin is technologically advanced/forward looking.

Yes, bitcoin moves slowly and deliberately because it has a $1+ trillion market sitting on its shoulders. You can't move fast and break things when an industry this large depends on it. You can't just implement any change in the network since what gives bitcoin its value is its strong security and consensus that is anti-fragile and resistant to attack (something no other cryptocurrency can claim). Even with changes that have widespread support from the network such as Taproot has a hard time finding consensus in how to even agree upon implementing it (LOT=True versus LOT=False).

Bitcoin is a slow moving, difficult to change technological innovator?  Like . . . uh . . . no other tech innovator then?

That being said, there are a lot of technological advancements being made with it that go unnoticed. Lightning Network was implemented as a side chain after the Segregated Witness upgrade that allows for scalability and its growth has been exponential over the last couple years. Blockstream's federated sidechain Liquid was implemented on mainnet and as seen some growth with some exchanges and some NFTs have been implemented on it as well. Numerous implementations of coinjoin networks have been implemented as a means to improve privacy. Neutrino has been released that allows for a more lightweight implementation of verifying the blockchain. Schnorr signatures are being worked on to improve privacy and further refine signature aggregation. Microsoft just released their live implementation of a new decentralized identity service that runs on the bitcoin network called ION. This will greatly help improve data privacy and identity ownership on the internet. Mining improvements with things like BetterHash and StratumV2 help improve mining decentralization. There are DAOs implemented on the bitcoin network like the Bisq decentralized exchange that allows for peer-to-peer exchanges without requiring KYC. The reality is that while it is difficult to make changes in the base layer of bitcoin because of its anti-fragile security, it is actually relatively easy to implement new technologies as sidechains or other layers in the protocol that don't require mass consensus to implement. This is where real-world feature sets will be implemented anyway.

This is just the tip of the iceberg as far as the technology improvements taking place on the bitcoin network. The truth of the matter is that the reason that alt-coins push the idea that "bitcoin is old tech and we have better tech and will replace it" narrative is because that's the only thing the can say to try and overcome bitcoin's 1st mover advantage and supreme network effect. At the end of the day, in order to overcome an incumbent's superior network effect, a competitor must be 10x better, but no alt-coin is 10x better than bitcoin. When it comes down to it, anything an alt-coin can do or any idea that is come up with will simply be implemented on the bitcoin network as well since that is where the security is.

So, the main benefit to bitcoin is that it was there first and to overcome the 'being firstness' would require something to be ten times better?  So there's not anywhere near as much drive to innovate tech.  But bitcoin is very technologically advanced!  And forward looking!

Crystal clear.  :P

[lifeanon269]

I can't tell how much is tongue-in-cheek here or not. So I'll just address it literally anyways.

OK.  Non-bitcoin crypto is snake oil, and bitcoin is technologically advanced/forward looking.

Yes, 99.9% of crypto-currencies out there are snake-oil at best and out right scams at worst. That's not really an exaggeration either. There are thousands of crypto-currencies out there and a vast majority of them are not traded on regulated exchanges. That doesn't mean there aren't cool ideas that exist outside of bitcoin. There are. But that doesn't change the reality of what a vast majority of other cryptocurrencies are. If you understand what a blockchain is and its benefits are, it becomes immediately apparent that a vast majority of crypto-currencies don't bring anything new or exciting to the table and frankly have no business being a blockchain at all (because they're completely centralized projects).

Bitcoin is a slow moving, difficult to change technological innovator?  Like . . . uh . . . no other tech innovator then?

Bitcoin's consensus mechanism is unlike any other out there. It is anti-fragile and resistant to change. It is the only one that has been attacked in the way that it has been and has withstood those attacks. Even Ethereum, the #2 crypto-currency by market-cap has been re-written several times and has been forked in ways that resulted it the altered non-backward compatible chain becoming the dominant one. Also, comparing bitcoin's anti-fragile consensus mechanisms to any other technology innovator in the traditional sense ignores the ease of which any centralized entity can change at a whim given enough forcing. You can't do that with bitcoin. But there is a big difference between the rigidity and anti-fragility of the consensus mechanism versus the rate at which you can innovate with a technology by building on top of it. Bitcoin's security is based on the former while its innovation comes from the latter.

So, the main benefit to bitcoin is that it was there first and to overcome the 'being firstness' would require something to be ten times better?  So there's not anywhere near as much drive to innovate tech.  But bitcoin is very technologically advanced!  And forward looking!

Crystal clear.  :P

If that was your take away after reading about some of the new technologies coming out was that bitcoin's advantage is simply that it was first, then I don't know what to tell you. I am not even sure what half your statement meant. I guess there are simply some people that can't be convinced even when shown otherwise. It is clear to me that you're just passing judgement on something that you obviously are not quite up to speed on, that's fine. I only try and give accurate info on the space since it is an area that I spend a lot of time on.

Also, the idea that an incumbent with a superior network effect requires a "10x improvement" in order to be unseated by a competitor is not a new concept. It has been studied a lot when it comes to network effects and it is not unique to bitcoin. Here is a good article with an overview of network effects that covers everything from shipping, social media, payment networks, and the telephone:

https://www.lynalden.com/bitcoins-network-effect/


...I also forgot to mention the Sphinx chat app that runs on the lightning network. It supports podcasting that allows you to stream satoshis to the content the content creator per minute that you listen. So it opens up new avenues of revenue possibilities and allows people to instantly sent micropayments to people in the chat and put paywalls behind messages that are sent and received. It's a pretty cool app that has a lot of new possibilities. The Breez wallet app is doing something similar with podcasting too. Pretty cool stuff really.

[Pomegranate12]

I was wrong

[WhiteTrashCash]

I did my one and only purchase of cryptocurrency when I was a kid. I bought a pack of Topps trading cards for a dollar and got a gold J.T. Snow rookie card in the pack. I immediately went to the local card shop and sold the card for its book value of $8. A couple days later, the card's value collapsed to only $1 and I was banned from the card shop. However, I used the proceeds from the sale to purchase a paperback copy of the Star Wars novel "Dark Force Rising" by Timothy Zahn.

That was the only time I dabbled in cryptocurrency, because these things are so volatile. It's like gambling. These days I just invest in index funds so I can have guaranteed profit.

[StashingAway]

I did my one and only purchase of cryptocurrency when I was a kid. I bought a pack of Topps trading cards for a dollar and got a gold J.T. Snow rookie card in the pack. I immediately went to the local card shop and sold the card for its book value of $8. A couple days later, the card's value collapsed to only $1 and I was banned from the card shop. However, I used the proceeds from the sale to purchase a paperback copy of the Star Wars novel "Dark Force Rising" by Timothy Zahn.

Small world, I just finished the 3+2 series. The novels hold up pretty well!

[mjr]

Bitcoin is a part of our economy now and it is only going to get more and more intertwined as more and more products and industries develop in the space

Bitcoin could disappear tomorrow and the economy wouldn't stumble in the slightest and 99% of the population wouldn't blink an eye.

A bunch of speculators would have done their dough.  Happens every day.

[Juan Ponce de León]

Bitcoin is a part of our economy now and it is only going to get more and more intertwined as more and more products and industries develop in the space

Bitcoin could disappear tomorrow and the economy wouldn't stumble in the slightest and 99% of the population wouldn't blink an eye.

A bunch of speculators would have done their dough.  Happens every day.

And yet here we are, BTC sitting just under US$60k and millions of people achieving financial freedom with crypto by doubling, tripling or even 10x or 20x their dough.  Actually happens every day.

[onecoolcat]

Bitcoin is a part of our economy now and it is only going to get more and more intertwined as more and more products and industries develop in the space

Bitcoin could disappear tomorrow and the economy wouldn't stumble in the slightest and 99% of the population wouldn't blink an eye.

A bunch of speculators would have done their dough.  Happens every day.

Your talking points are so old they are going through puberty.

[ChpBstrd]

Bitcoin could disappear tomorrow and the economy wouldn't stumble in the slightest and 99% of the population wouldn't blink an eye.

A bunch of speculators would have done their dough.  Happens every day.

IDK. Bitcoin has a $1.1T "market cap", much of which is owned by investors who also own stocks and real estate, particularly in the U.S. and much of which was traded for dollars by those investors within the past couple of years.

Anyone who thought in the late '90s that the imminent blowup of the dot-com/telecom bubble would be limited to dot-com/telecom stocks (ahem) was rapidly proven wrong when the entire market was torpedoed by the collapse of that one sector. As investors and funds lost piles of money on tech stocks, they had to liquidate non-tech stocks to rebalance or cap their losses. The same thing happened in '08 with mortgages. A crypto blowup would be at least as bad, particularly since almost nobody in crypto is hedged.

[WillWork4Mustache]

I usually avoid discussing bitcoin with people as I find most people unsurprisingly uniformed. Reminds me of trying to explain the internet 30years ago (not comparing the technology as bitcoin is not revolutionary like the internet). I distinctly remember conversations with people who said it was stupid, the information sharing had no purpose, if they wanted to transmit information they could pick up the phone or mail them. They had a 1000 reasons why the technology would never be needed. Today they sit on the internet all day checking stock prices and placing orders like some armchair daytrader. What I find interesting is when I bring up that conversation today, they still believe they were right, somehow that was a different internet, and what casually entered their life little by little over the years is some new useful different type of internet.

I'm no expert, but i have been a developer on some cryptocurrencies, implemented cross-chain transactions, coded miners and mining pools, so I have some of the basics of how it works. I've been lucky enough to work with some people who are experts and listened to their visionary ideas of where it's going, honestly some of the possibilities of distributed consensus is mind blowing for me. But in general, a couple of years ago I gave up on talking with people who have such strong opinions on technology but can't understand how it works.

However @celerystalks made me change my mind. While I disagree with much of his/her posts, i respect the consistency of them. Two posts stuck out the most for me.

1st is saying blockchain is worthless because it is inefficient. This correlates to saying democracy is worthless because a dictator could make all the same decisions but much quicker. While i can see your point, a dictatorship has many advantages, it's important to look at the times the two systems might make different decisions to understand if it's worth the extra overhead of consensus. I believe even the most ardent dictator at times could see some use case for democracy, perhaps asking his advisors to vote on a decision he is unsure of, or what his/her family wants for dinner. Surely there must be some value in it, while we have both forms of government in the world, why would anyone want democracy?

2nd is saying that if you buy all the shares of a company eventually you own that company. This honestly opened my eyes a bit, even though I like comparing bitcoin to a stock for many of the similarities, this is strikingly different. A company can go on making money regardless of the owners but if someone bought every bitcoin it would essentially become valueless as everyone would just move on. I like looking at the extreme cases as that's where you generally find problems, and that certainly is a problem. Thanks for opening my eyes to this.

As for my take, I like blockchain, I like bitcoin, I think it's a great way for everyday people to transfer money, I don't think it's a currency, and I don't think it solved the Byzantine Generals problem.

I think Funny Money is a good name for it, it is a lot like money, but different in a few consequential ways.

-WW4M

[MustacheAndaHalf]

1st is saying blockchain is worthless because it is inefficient. This correlates to saying democracy is worthless because a dictator could make all the same decisions but much quicker.

Just because pets.com failed, doesn't mean all internet companies failed.

Bitcoin's Blockchain uses cpu power as proof of work, which is why it spends much more energy than Etherium's blockchain.  Saying that Bitcoin is inefficient does not mean all blockchains share the same problem.  That criticism is specific to Bitcoin, not common to all virtual currencies, as you claim.

[lifeanon269]

Bitcoin's Blockchain uses cpu power as proof of work, which is why it spends much more energy than Etherium's blockchain.  Saying that Bitcoin is inefficient does not mean all blockchains share the same problem.  That criticism is specific to Bitcoin, not common to all virtual currencies, as you claim.

It is always painfully obvious when someone makes a post but doesn't quite understand what they're talking about. Ethereum uses proof of work as well and always has (Ethash). They've been looking to switch to proof of stake, but its been in the works for a long time. Proof-of-stake has way too many security issues to work out and leads to centralization of the network. The reason why Ethereum uses less energy is because there is simply less incentives and money to mine it than mining bitcoin. In fact, Ethereum is even less energy efficient than bitcoin in the sense that there is way less value in the network/market compared to how much energy it consumes. It consumes about 32.38TWh of electricity annually (compared to bitcoin's 93TWh) and has a carbon footprint of 13.38Mt CO2 annually (compared to 44.31Mt CO2 for bitcoin). Bitcoin's market cap is more than 4 times larger currently.

https://digiconomist.net/ethereum-energy-consumption/
https://digiconomist.net/bitcoin-energy-consumption/

[onecoolcat]

Bitcoin's Blockchain uses cpu power as proof of work, which is why it spends much more energy than Etherium's blockchain.  Saying that Bitcoin is inefficient does not mean all blockchains share the same problem.  That criticism is specific to Bitcoin, not common to all virtual currencies, as you claim.

It is always painfully obvious when someone makes a post but doesn't quite understand what they're talking about. Ethereum uses proof of work as well and always has (Ethash). They've been looking to switch to proof of stake, but its been in the works for a long time. Proof-of-stake has way too many security issues to work out and leads to centralization of the network. The reason why Ethereum uses less energy is because there is simply less incentives and money to mine it than mining bitcoin. In fact, Ethereum is even less energy efficient than bitcoin in the sense that there is way less value in the network/market compared to how much energy it consumes. It consumes about 32.38TWh of electricity annually (compared to bitcoin's 93TWh) and has a carbon footprint of 13.38Mt CO2 annually (compared to 44.31Mt CO2 for bitcoin). Bitcoin's market cap is more than 4 times larger currently.

https://digiconomist.net/ethereum-energy-consumption/
https://digiconomist.net/bitcoin-energy-consumption/

I've heard, from my Ethereum mining friend, that Ethereum is switching to POS in June.  IDK if this is true.

I don't know how much a security threat there really is from POS coins.  Cardano is a pure POS coin and it touts itself as being completely decentralized as of the past month.  Polkadot has a system in place to slash bad actors staked amounts to decentivize bad conduct on the network.  Seems to me that POS has come a long way in security.

[lifeanon269]

I've heard, from my Ethereum mining friend, that Ethereum is switching to POS in June.  IDK if this is true.

I don't know how much a security threat there really is from POS coins.  Cardano is a pure POS coin and it touts itself as being completely decentralized as of the past month.  Polkadot has a system in place to slash bad actors staked amounts to decentivize bad conduct on the network.  Seems to me that POS has come a long way in security.

Yes, ETH2.0 is supposedly coming out some time this year, which includes a switch to PoS. A lot of question marks with it still and whether a successful switch happens.

The problem with proof-of-stake is that in inevitably leads to centralization. The incentives are really not much different than our current financial system today. The more money you have, the more "political" control in the network you have. The real-world capital requirement is a huge key part of PoW's security model. Whereas with PoS, simply owning a token is enough to exert some control in the network, with PoW you need to invest in real world capital resources and energy in order to earn something back. Many people store their funds on centralized custodial services (like exchanges). This means that with PoS those centralized authorities could exert an outsized influence on the network with other peoples' money through staking. Something like the S2X attack that was attempted on the bitcoin network and thwarted by user resistance with economic validating nodes, with centralized entities that hold large amounts of funds like what would take place in a PoS network would've yield much different results and an attack like that would be much more likely to be successful. With PoW, it isn't enough to just have a lot of money, you need to be able to risk that money, acquire enough electricity, acquire enough computing hardware, and sustain an attack with it. With PoS, you can have your cake and eat it too.

Money in essence is easy to come by. Especially in today's world. The rich have extremely easy access to funds through cheap debt and leverage and for nation-state actors...money printing. That means that the rich could easily exert more force against the network. PoW systems inherently have some protections against this.

Another problem with PoS is in its distribution. Cardano, for example, was mostly distributed in Japan and an organization (IOHK) holds are large stake in it. Bitcoin has one of the most fair distributions possible and it very likely can't be duplicated today. It was circulated for over 2 years before it even had a price and people could freely acquire some on the internet. There was no premine. It's creator was anonymous and went dark early in its life. Having a fair distribution is even more critical in a PoS network to ensure decentralization.

This doesn't even touch on the technical aspects of PoS such as bribing attacks, long range attacks, nothing-at-stake attacks, etc that various PoS networks attempt to address in various ways.

[MustacheAndaHalf]

Bitcoin's Blockchain uses cpu power as proof of work, which is why it spends much more energy than Etherium's blockchain.  Saying that Bitcoin is inefficient does not mean all blockchains share the same problem.  That criticism is specific to Bitcoin, not common to all virtual currencies, as you claim.

It is always painfully obvious when someone makes a post but doesn't quite understand what they're talking about. Ethereum uses proof of work as well and always has (Ethash). They've been looking to switch to proof of stake, but its been in the works for a long time

My main point was that proof of stake protocols exist, and that Bitcoin being inefficient does not mean all cryptos are inefficient.  It's also interesting how you ignore even more "painfully obvious" comments on the topic at hand:

1st is saying blockchain is worthless because it is inefficient. This correlates to saying democracy is worthless because a dictator could make all the same decisions but much quicker.

[MustacheAndaHalf]

It's also "painfully obvious" when posters equate a normal brokerage account with an offshore crypto exchange caught violating U.S. banking laws, like your best example "Bitmex" back in this post:

There's also no counter-weight to the optimism.  If someone thinks Tesla is overpriced, they can short the stock or buy PUT options.  If someone who doesn't own Bitcoin thinks it is about to fall ... you can't short it in your brokerage account.  There's no options to buy.  So the only people who can express their views are buyers.

Ya, that's not true. You can short bitcoin on several exchange/broker websites (BitMex probably being the largest). I track many of the larger transactions that take place and there were several very large liquidated shorts that just took place after bitcoin just breached $35k ($6.4M, $2.4M, and $1.3M). In fact, short squeezes in bitcoin are often what cause many of the larger upside swings. Long story short though is that not many choose to short bitcoin because it is absolutely stupid to do so with something that is so lopsided toward buy demand and who's upside is so tremendously high.

I said "you can't short it in your brokerage account", and BitMex is not a brokerage.  If someone buys PUT options on TSLA, that goes to the CBOE... there's a well established system of what happens to enforce the contracts.

BitMex is registered in an island off the coast of Africa.  To quote Wikipedia:
"BitMEX was founded in 2014 by Arthur Hayes, Ben Delo, and Samuel Reed, with financing from family and friends."
...
"On October 1, 2020, Hayes, Reed, Delo, and Gregory Dwyer were indicted on charges of violating the U.S. Bank Secrecy Act and conspiracy to violate that law, arising from allegations that the four failed to implement anti-money laundering measures"
https://en.wikipedia.org/wiki/BitMEX

[lifeanon269]

My main point was that proof of stake protocols exist, and that Bitcoin being inefficient does not mean all cryptos are inefficient.  It's also interesting how you ignore even more "painfully obvious" comments on the topic at hand:

1st is saying blockchain is worthless because it is inefficient. This correlates to saying democracy is worthless because a dictator could make all the same decisions but much quicker.

Well you were wrong in what you posted. If you're going to make a point, regardless of what that point is, you should post information that is actually factual. Also, how do you even know he was referring to energy usage? He didn't say anything about energy usage at all. He also didn't say bitcoin specifically, he said blockchains. Blockchains are inefficient databases architectures. That's because they're broadcast networks. They must be in order to maintain decentralization. That means inefficiency is inherent to being a blockchain. If a blockchain isn't decentralized it has no benefits over a typical relational database like SQL. Therefore it is inefficient by design in the sense that you can't allow for every transaction in the world that could be broadcast confirmed on a blockchain. It's simply not feasible. Doesn't matter whether the consensus mechanism is PoW or PoS, the same holds true.

Anyways, in regards to energy usage (if that's indeed what is meant by "inefficient" here), bitcoin has several downward pressures applied to it from an energy consumption perspective. While price currently provides an upward forcing in the amount of energy it consumes, things like ASIC efficiency increases, the difficulty adjustment, and the block reward halvings provide downward forcings on that energy usage. I don't think it is accurate to call bitcoin inefficient from an energy usage standpoint. First off, a vast majority of bitcoins in circulation were mined at a time when energy usage was small and mined with CPU/GPUs. Therefore the ratio between the amount of energy spent per unit of value for bitcoin is very small and its large energy consumption during the production period of bitcoin's life will be very fleeting.

This is because of bitcoin's supply halvings that take place every 4 years. In order for the price to have a continued upward pressure on its energy usage, the price would need to continue to be exponential well into the future to counteract the newly created supply being cut in half every 4 years. So either bitcoin becomes extremely valuable in the future and thus provides humanity a lot of value for its energy use in comparison, or miners begin to derive a majority of their revenues from fees rather than block subsidy. A combination of both those things is likely to occur, but it is only a matter of time before miners will derive a majority of their revenue from fees as bitcoin transitions into a fee based mining incentive structure.

Bitcoin profit margins are typically pretty slim due to the intense global competition involved. Therefore as the market continues to move to a fee based incentive, bitcoin's energy usage will be as a direct result of economic activity that takes place on the bitcoin blockchain. Every fee paid to conduct a transaction will result in a nearly equivalent amount of the cheapest global energy consumed. There is no monetary system that can come close to even claiming such an efficiency. Bitcoin will not need to deal with any of the losses of energy found in traditional systems such as lost productivity, bureaucratic waste, poor governance, logistics, regulatory overhead, etc. If I need to spend a $100 fee to send a bitcoin transaction, that $100 fee will result in nearly $100 of some of the cheapest energy on the planet being consumed to confirm my transaction. Furthermore, 1 transaction on the bitcoin network does not equal 1 payment. Bitcoin's base layer is a settlement layer. 1 transaction likely equals many payments (potentially thousands or millions) as a transaction can consist of many batched transactions or a settlement transactions for the lightning network settling many millions of transactions. The efficiency here at the base layer from an energy standpoint is something that will actually be pretty outstanding as time goes on.

Furthermore, due to mining competition, ASIC efficiency increases, and the difficulty adjustment, mining bitcoin must take place with the cheapest electricity found globally. That means that as renewable energy continues to become the dominant cheap form of energy in all global markets, bitcoin mining's transition to an all renewable network will take place faster than any other industry so long as fossil fuel subsidies aren't increased to keep pace with renewable advancements.

IMO, because of the above features of bitcoin, I don't think it is fair to call bitcoin inefficient from an energy perspective. I feel it is actually quite efficient in that regard.

It's also "painfully obvious" when posters equate a normal brokerage account with an offshore crypto exchange caught violating U.S. banking laws, like your best example "Bitmex" back in this post:

There's also no counter-weight to the optimism.  If someone thinks Tesla is overpriced, they can short the stock or buy PUT options.  If someone who doesn't own Bitcoin thinks it is about to fall ... you can't short it in your brokerage account.  There's no options to buy.  So the only people who can express their views are buyers.

Ya, that's not true. You can short bitcoin on several exchange/broker websites (BitMex probably being the largest). I track many of the larger transactions that take place and there were several very large liquidated shorts that just took place after bitcoin just breached $35k ($6.4M, $2.4M, and $1.3M). In fact, short squeezes in bitcoin are often what cause many of the larger upside swings. Long story short though is that not many choose to short bitcoin because it is absolutely stupid to do so with something that is so lopsided toward buy demand and who's upside is so tremendously high.

I said "you can't short it in your brokerage account", and BitMex is not a brokerage.  If someone buys PUT options on TSLA, that goes to the CBOE... there's a well established system of what happens to enforce the contracts.

BitMex is registered in an island off the coast of Africa.  To quote Wikipedia:
"BitMEX was founded in 2014 by Arthur Hayes, Ben Delo, and Samuel Reed, with financing from family and friends."
...
"On October 1, 2020, Hayes, Reed, Delo, and Gregory Dwyer were indicted on charges of violating the U.S. Bank Secrecy Act and conspiracy to violate that law, arising from allegations that the four failed to implement anti-money laundering measures"
https://en.wikipedia.org/wiki/BitMEX

Haha, you literally dug up a post from 4 months ago. I'm flattered that you remember all my posts like that. I really am. But can I ask that if you're going to dig up old posts like that, can you at least quote the entire conversation?

No, you can't short bitcoin in your typical brokerage account.

Your original point was simply that you were implying that there is no downwards pressure on bitcoin to counteract all the demand, when there is. There are several places you can short bitcoin.

https://99bitcoins.com/short-sell-bitcoin/
https://www.investopedia.com/news/short-bitcoin/

You're right that I exaggerated in my original post, saying there was "no place" to short bitcoin.  But I didn't expect mainstream investment choices to be put on a par with websites like the one you gave as an example.

I wasn't equating BitMex to traditional mainstream financial brokers. I was simply countering your factually incorrect claim that there is nowhere to short bitcoin or that there isn't any downward pressure on bitcoin's price like you insinuated by saying: "There's also no counter-weight to the optimism." That's not true at all and there have been many short squeezes throughout bitcoin's life where the price has skyrocketed in the matter of an hour as shorters get liquidated to the tune of millions/billions of dollars. Therefore it stands to reason that if there is a major price movement upwards due to shorts getting liquidated, that means there was that amount of downward pressure being applied to the market while those shorts were in play.

No you can't short bitcoin in your typical mainstream brokerage account. I never equated the places you can short bitcoin at to your traditional mainstream brokerage. But at the same time you also can't buy actual bitcoin at market price at your typical brokerage either, so I am not sure what point you're trying to make by pointing that out when there really isn't unequal balance in the market in that regard. Many of the places you can actually buy bitcoin at you can also short bitcoin and I provided a couple links with references in that post from 4 months ago that you conveniently left out.

[celerystalks]

However @celerystalks made me change my mind. While I disagree with much of his/her posts, i respect the consistency of them. Two posts stuck out the most for me.

1st is saying blockchain is worthless because it is inefficient. This correlates to saying democracy is worthless because a dictator could make all the same decisions but much quicker. While i can see your point, a dictatorship has many advantages, it's important to look at the times the two systems might make different decisions to understand if it's worth the extra overhead of consensus. I believe even the most ardent dictator at times could see some use case for democracy, perhaps asking his advisors to vote on a decision he is unsure of, or what his/her family wants for dinner. Surely there must be some value in it, while we have both forms of government in the world, why would anyone want democracy?

I don't follow the analogy between blockchain/cryptos and forms of government.

By and large, money is defined as have these three attributes: (1) medium of exchange, (2) unit of account, and (3) store of value.  Currently fiat money isn't really true money.  It is a form of currency since it acts as a medium of exchange and a unit of account and is a reasonable short term store of value.  But long term, fiat money will inevitably loose value to inflationary practices of government. 

Blockchain and bitcoin and cryptos in general are not money (which is essentially the point of this thread, I might add).  Although a handful of bonafide transactions of goods/services for crypto do take place, cryptos are not really used as a medium of exchange IRL.  Further, cryptos are not used as a unit of account.  They are too volatile and there is no foreseeable way to quell the volatility.  No one would state their accounts and business records and P&L and cashflow statements in terms of bitcoin because they would all be meaningless nonsense 48 hrs later.  Some have argued that cryptos are a store of value.  I find this hard to believe since they have only existed for 12 years and nothing of tangible value is conveyed when they are bought.  It seems to be based on the greater fool principal to me.

As to the analogy with governments.  This analogy is not really apropos because there is no agreement on what the purpose of government is and therefore its definition, the way there is with money. So, first we would need to agree on the purpose of government to define its critical attributes.  In Western societies republics dominate.  This means that the government exists and is operated for the benefit of the citizens and is based on the principal of the consent of the governed. Even vestigial Western monarchies have adopted republican principals.  So in a republic, democracy is paramount since the polls provide for a way fo the governed to select and give their consent to their government officials and determine the policy of the government.  Is it sloppy and inefficient as compared to other forms of government? Perhaps, but only if the goal of government is efficiency.  In a dictatorship, for example, the government is run for the benefit of the dictator and so the citizens and subjects of the dictatorship serve the dictator.  Here, the dictator, being the only one who is truly enfranchised, would likely put importance on the goal of efficiency of decision making. And as you point out a dictator might use a democratic process as a collaborative exercise with a team of advisors (or more likely as a way to set up scape goats if they are need needed later).  But really, since the goals of the different forms of governments are different, they cannot be a good analogy for the comparison between fiat and crypto since both fiat and crypto purport to be money and serve the same goal.

[StashingAway]

Blockchain and bitcoin and cryptos in general are not money (which is essentially the point of this thread, I might add).  Although a handful of bonafide transactions of goods/services for crypto do take place, cryptos are not really used as a medium of exchange IRL.  Further, cryptos are not used as a unit of account.  They are too volatile and there is no foreseeable way to quell the volatility.  No one would state their accounts and business records and P&L and cashflow statements in terms of bitcoin because they would all be meaningless nonsense 48 hrs later.  Some have argued that cryptos are a store of value.  I find this hard to believe since they have only existed for 12 years and nothing of tangible value is conveyed when they are bought.  It seems to be based on the greater fool principal to me.

This is really concise and I think articulates what I've been trying to put my finger on for a while following this thread. Blockchain and crypto are great technology and coming online with some interesting and perhaps eventually essential uses. But currently they aren't useful in the way you described regarding stability of currency. I have a couple of wallets, but I don't want to spend them... which is is counter toward what *I* understand the end use to be.

[mjr]

Bitcoin is a part of our economy now and it is only going to get more and more intertwined as more and more products and industries develop in the space

Bitcoin could disappear tomorrow and the economy wouldn't stumble in the slightest and 99% of the population wouldn't blink an eye.

A bunch of speculators would have done their dough.  Happens every day.

Your talking points are so old they are going through puberty.

Basic truths are ageless

[mjr]

And yet here we are, BTC sitting just under US$60k and millions of people achieving financial freedom with crypto by doubling, tripling or even 10x or 20x their dough.  Actually happens every day.

Yes, it's called gambling.  Even gambling can be said to be part of the economy, because it's taxed and regulated.  Not so cryptos.  It's just people passing money to each other for an asset with no instrinsic value.  I just laugh at your quoting 10x, 20x.  There's no value being added to support those gains, it ends only one way.

[Juan Ponce de León]

And yet here we are, BTC sitting just under US$60k and millions of people achieving financial freedom with crypto by doubling, tripling or even 10x or 20x their dough.  Actually happens every day.

Yes, it's called gambling.  Even gambling can be said to be part of the economy, because it's taxed and regulated.  Not so cryptos.  It's just people passing money to each other for an asset with no instrinsic value.  I just laugh at your quoting 10x, 20x.  There's no value being added to support those gains, it ends only one way.

We're 12 years in and still waiting for it to end that one way.  Any day now right?  What if we're still going after 20 years?  When do you actually admit you were wrong and missed out on 1000000000000000000000% gains?

[lifeanon269]

By and large, money is defined as have these three attributes: (1) medium of exchange, (2) unit of account, and (3) store of value.  Currently fiat money isn't really true money.  It is a form of currency since it acts as a medium of exchange and a unit of account and is a reasonable short term store of value.  But long term, fiat money will inevitably loose value to inflationary practices of government. 

Blockchain and bitcoin and cryptos in general are not money (which is essentially the point of this thread, I might add).  Although a handful of bonafide transactions of goods/services for crypto do take place, cryptos are not really used as a medium of exchange IRL.  Further, cryptos are not used as a unit of account.  They are too volatile and there is no foreseeable way to quell the volatility.  No one would state their accounts and business records and P&L and cashflow statements in terms of bitcoin because they would all be meaningless nonsense 48 hrs later.  Some have argued that cryptos are a store of value.  I find this hard to believe since they have only existed for 12 years and nothing of tangible value is conveyed when they are bought.  It seems to be based on the greater fool principal to me.

None of the critiques you mentioned in regards to bitcoin are inherent properties of bitcoin though. In fact, all of the things you mentioned are all things that will likely be solved with time as it continues to be adopted. Usage as a medium of exchange continues to grow and there is no reason to believe that trend will suddenly reverse. Crypto currencies are not used as a unit of account but that doesn't mean that someday they won't be. That's not an inherent property against bitcoin but merely a sign of how mainstream something is or isn't. It's not mainstream at all so it stands to reason that it won't be used as a unit of account anywhere. It's also very volatile so it doesn't quite make sense to price goods in bitcoin, but volatility is also a property of its small market in comparison to the overall economy. There is a lot of money sitting on the outside of bitcoin and with a lack of supply elasticity, it doesn't take much to swing the price of bitcoin. But that too is a problem that can and likely will be solved with time. As far as being a store of value goes, so far it has been a pretty good store of value, but as you said, it has only been around for 12 years, so that too will just simply require time to solve. Every day that bitcoin exists and continues to produce blocks is another validation that bitcoin is here to stay and justifies its price in the market.

Finally, while you mention 3 common properties of money, they're not the only properties that are commonly found with money. For example, money also can have some of these properties as well:

-verifiable
-fungibility
-portability
-durable
-divisible
-scarce
-counterfeit resistance

Bitcoin excels as all of these other properties as well that can help cement it as a good sound source of money. It also adds a few new properties that are very important in this new age we live in like programmability and decentralization. After all, humans throughout history have used many various forms of money that haven't had any of the above properties of money that you and I both mentioned. Shells, beads, jewelry, metals, stones, etc. Fiat currencies after all have only existed in human history for a short period of time. People will use whatever currency that suits their needs best and to ignore bitcoin's sound properties as a form of money ignores large parts of the history of money.

Bitcoin is absolutely a paradigm shift and if you keep forcing new ideas into concrete definitions of what you think something should be, you're going to get left behind.

[Log]

Cryptocurrency is not legal US tender. The only legal tender in the US is the US dollar in all forms. Cryptocurrency will never become mainstream because the US government will shut it down. We already have laws that discourage businesses from accepting foreign currency. To accept foreign currency you have to record the person’s government ID information and keep the transaction record for a certain number of years. Your business can be accused of money laundering, so it’s very rare in the US for companies to go through this trouble. Very rare to find a company that accepts Euros or Pesos in  the US. The same will be true for cryptocurrency. It’s even worse because cryptocurrency is not legal tender anywhere!

I'm still pretty undecided/non-ideological about cryptocurrencies, but the US putting some ban or overly-burdensome regulations on crypto would by no means destroy it. Likely it would deal a great blow to the values of these things in the short-term, but those who are ideologically committed to crypto and the whole DeFi movement would simply take their business to more crypto-friendly jurisdictions, and the space would continue to grow without the US getting a slice of the pie. Eventually, the US would just be harming itself, and then the crypto market would have another big boom whenever the US rescinded this regulation.

People saying the blockchain is the next innovation on par with the internet are probably deluding themselves. People saying cryptocurrency will disappear any day now are also probably deluding themselves.

Even if you remain ideologically committed to only investing in productive assets like stocks or real estate, that doesn't mean everyone agrees with you. Just because gold is basically worthless in a productive sense doesn't mean the market agrees with that assessment. As long as people agree Bitcoin is worth something, it will be worth something, and I don't think that's going away.

[celerystalks]

None of the critiques you mentioned in regards to bitcoin are inherent properties of bitcoin though. In fact, all of the things you mentioned are all things that will likely be solved with time as it continues to be adopted. Usage as a medium of exchange continues to grow and there is no reason to believe that trend will suddenly reverse. Crypto currencies are not used as a unit of account but that doesn't mean that someday they won't be. That's not an inherent property against bitcoin but merely a sign of how mainstream something is or isn't. It's not mainstream at all so it stands to reason that it won't be used as a unit of account anywhere. It's also very volatile so it doesn't quite make sense to price goods in bitcoin, but volatility is also a property of its small market in comparison to the overall economy. There is a lot of money sitting on the outside of bitcoin and with a lack of supply elasticity, it doesn't take much to swing the price of bitcoin. But that too is a problem that can and likely will be solved with time. As far as being a store of value goes, so far it has been a pretty good store of value, but as you said, it has only been around for 12 years, so that too will just simply require time to solve. Every day that bitcoin exists and continues to produce blocks is another validation that bitcoin is here to stay and justifies its price in the market.

Finally, while you mention 3 common properties of money, they're not the only properties that are commonly found with money. For example, money also can have some of these properties as well:

-verifiable
-fungibility
-portability
-durable
-divisible
-scarce
-counterfeit resistance

Bitcoin excels as all of these other properties as well that can help cement it as a good sound source of money. It also adds a few new properties that are very important in this new age we live in like programmability and decentralization. After all, humans throughout history have used many various forms of money that haven't had any of the above properties of money that you and I both mentioned. Shells, beads, jewelry, metals, stones, etc. Fiat currencies after all have only existed in human history for a short period of time. People will use whatever currency that suits their needs best and to ignore bitcoin's sound properties as a form of money ignores large parts of the history of money.

Bitcoin is absolutely a paradigm shift and if you keep forcing new ideas into concrete definitions of what you think something should be, you're going to get left behind.

Your analysis relies too heavily on what you imagine bitcoin to be in the future to be taken very seriously.  This is probably why you spend so much time here selling the dream and have such strong reactions to people spreading, as I believe you called it once, FUD.  Because if more and more people don't buy into your vision of the future, it becomes obvious that bitcoin has no real present value. 

You correctly point out some other attributes of things that are used as often used as money: fungibility, portability, divisibility.  However, the definition of money is that it used as a medium of exchange, a unit of account, and a store of value.  This is not my definition, it is the definition. Without those three properties, a thing is not money. It's as simple as that. Simply being fungible, portable, divisible does not enhance the case for bitcoin being money any more than it does for beach sand. 

[lifeanon269]

Your analysis relies too heavily on what you imagine bitcoin to be in the future to be taken very seriously.  This is probably why you spend so much time here selling the dream and have such strong reactions to people spreading, as I believe you called it once, FUD.  Because if more and more people don't buy into your vision of the future, it becomes obvious that bitcoin has no real present value. 

You correctly point out some other attributes of things that are used as often used as money: fungibility, portability, divisibility.  However, the definition of money is that it used as a medium of exchange, a unit of account, and a store of value.  This is not my definition, it is the definition. Without those three properties, a thing is not money. It's as simple as that. Simply being fungible, portable, divisible does not enhance the case for bitcoin being money any more than it does for beach sand.

None of those things you critiqued bitcoin on are inherent properties to bitcoin though. Do you not agree with that? All of those things are simply growing pains.

-It isn't used much as a medium of exchange
-It isn't used as a unit of account because it is too volatile
-It isn't a store of value because it has only been around for 12 years

Not a single on of those things you mentioned is an inherent property of bitcoin and all of those things simply have time as a remedy.

To discount bitcoin on those merits alone is a gross misunderstand of and/or bias against bitcoin.

I am not basing my analysis on what I imagine bitcoin will be in the future. I am basing my analysis on the actual properties bitcoin holds and the fact that in its 12 short years it is already one of the largest currencies in the world. You say more and more people aren't buying into my "vision of the future", but in reality the opposite is taking place. More and more people are recognizing bitcoin for what it is. Bitcoin is already one of the 3rd largest currencies in the world and even if you choose to base it on M1 or M2 supply it still ranks as one of the largest in the world. I am not sure why you continue to be in delusion about this. Bitcoin doesn't care whether or not you choose to categorize it as money or not based on your or anyone's personal rigid definition. Do people in Russia who use the Ruble care whether or not you consider their currency money when they go to purchase goods with it? No they don't. Bitcoin is a larger currency than the Russian Ruble and nobody cares whether or not you consider it a good medium of exchange when they purchase goods with it. There is more economic activity taking place with bitcoin than there is taking place on a majority of fiat currencies around the world.

https://decrypt.co/39425/bitcoin-is-3rd-largest-world-currency
https://fiatmarketcap.com/

Wake up. Bitcoin is here to stay.

[celerystalks]

None of those things you critiqued bitcoin on are inherent properties to bitcoin though. Do you not agree with that? All of those things are simply growing pains.

According to you..

-It isn't used much as a medium of exchange
-It isn't used as a unit of account because it is too volatile
-It isn't a store of value because it has only been around for 12 years

Not a single on of those things you mentioned is an inherent property of bitcoin and all of those things simply have time as a remedy.

You hope. 

I agree that bitcoin doesn't fit the definition of money or currency.

To discount bitcoin on those merits alone is a gross misunderstand of and/or bias against bitcoin.

I am not basing my analysis on what I imagine bitcoin will be in the future. I am basing my analysis on the actual properties bitcoin holds and the fact that in its 12 short years it is already one of the largest currencies in the world. You say more and more people aren't buying into my "vision of the future", but in reality the opposite is taking place. More and more people are recognizing bitcoin for what it is. Bitcoin is already one of the 3rd largest currencies in the world and even if you choose to base it on M1 or M2 supply it still ranks as one of the largest in the world. I am not sure why you continue to be in delusion about this. Bitcoin doesn't care whether or not you choose to categorize it as money or not based on your or anyone's personal rigid definition. Do people in Russia who use the Ruble care whether or not you consider their currency money when they go to purchase goods with it? No they don't. Bitcoin is a larger currency than the Russian Ruble and nobody cares whether or not you consider it a good medium of exchange when they purchase goods with it. There is more economic activity taking place with bitcoin than there is taking place on a majority of fiat currencies around the world.

https://decrypt.co/39425/bitcoin-is-3rd-largest-world-currency
https://fiatmarketcap.com/

Wake up. Bitcoin is here to stay.

No. You have to still haven't proven that bitcoin is a money.  We don't accept this conclusion.  You can't admit that bitcoin does not meet the criteria for being money and then go about calling it money and and currency.  This is the logical fallacy of begging the question also called assuming the conclusion.

Further regarding the Ruble: it is currency.  In fact you point out that people use it to purchase goods.  So arguably it is acting as a medium of exchange as well as a unit of account.  Assuming that it also acts as a reasonable store of value it meets the definition of money.

The "economic activity" in bitcoin and cryptos is essentially all speculation.  People trading fiat for cryptos, going for a wild ride, and then trading back to fiat again. It is not productive economic activity that causes a rational allocation of goods and services within the economy.  The money is not being traded for a thing that leaves the purchaser better off today.  It is sterile economic activity, and therefore a net negative on society. 

[lifeanon269]

None of those things you critiqued bitcoin on are inherent properties to bitcoin though. Do you not agree with that? All of those things are simply growing pains.

According to you..

You failed to answer the question I asked. All those things you critiqued bitcoin on are not inherent properties of bitcoin. Do you not agree with that??

No. You have to still haven't proven that bitcoin is a money.  We don't accept this conclusion.  You can't admit that bitcoin does not meet the criteria for being money and then go about calling it money and and currency.  This is the logical fallacy of begging the question also called assuming the conclusion.

Further regarding the Ruble: it is currency.  In fact you point out that people use it to purchase goods.  So arguably it is acting as a medium of exchange as well as a unit of account.  Assuming that it also acts as a reasonable store of value it meets the definition of money.

The "economic activity" in bitcoin and cryptos is essentially all speculation.  People trading fiat for cryptos, going for a wild ride, and then trading back to fiat again. It is not productive economic activity that causes a rational allocation of goods and services within the economy.  The money is not being traded for a thing that leaves the purchaser better off today.  It is sterile economic activity, and therefore a net negative on society. 

How does one "prove" that bitcoin is a money? Given your rigid definitions you could make the argument that nothing is money by critiquing various aspects of anything that people actually choose to use as money. You ignore the history of what money is and what has been used as money. If no money is perfect then why are you biased at casting a rigid definition of money toward bitcoin and not all other forms of money that have been used throughout human history?

Earlier you claimed that currently fiat currencies are not money and now you're claiming that the Ruble is a currency. It seems like you're either arguing semantics and trying to force things into conformity of what you feel money is based on your own personal viewpoints.

No, contrary to what you want to believe, there is a lot of real economic activity that takes place with bitcoin. Billions of dollars of economic activity each year takes place. Merchant services like Coinbase and BitPay alone are doing multi-billion dollars in activity each year and that doesn't even account for the more open and adhoc exchange of goods and service that takes place either directly between customer and merchant or with open source merchant solutions like BTCPayServer for which there isn't much data for. Coinbase alone has over 8000 merchants using their services for selling goods. That's probably more companies than there are in a large chunk of the countries that have their own fiat currencies. If billions of real economic activity that takes place with bitcoin doesn't constitute economic activity to you, then that must mean that a large amount of the currencies on this list are not real money to you contrary to what the people might think who actually use them. Just because bitcoin doesn't have borders and there isn't an "economic center" to its usage doesn't mean there isn't any.

https://fiatmarketcap.com/

At the end of the day, you're going to have to continue to move the goalposts of your money definition in order to continue to keep bitcoin out of your definition. That seems to be a 'you' problem rather than a problem for the growing number of people every day that choose to use bitcoin.

[celerystalks]

None of those things you critiqued bitcoin on are inherent properties to bitcoin though. Do you not agree with that? All of those things are simply growing pains.

According to you..

You failed to answer the question I asked. All those things you critiqued bitcoin on are not inherent properties of bitcoin. Do you not agree with that??

I agree that bitcoin is not money.  If you have an argument, go ahead and make it. 

No. You have to still haven't proven that bitcoin is a money.  We don't accept this conclusion.  You can't admit that bitcoin does not meet the criteria for being money and then go about calling it money and and currency.  This is the logical fallacy of begging the question also called assuming the conclusion.

Further regarding the Ruble: it is currency.  In fact you point out that people use it to purchase goods.  So arguably it is acting as a medium of exchange as well as a unit of account.  Assuming that it also acts as a reasonable store of value it meets the definition of money.

The "economic activity" in bitcoin and cryptos is essentially all speculation.  People trading fiat for cryptos, going for a wild ride, and then trading back to fiat again. It is not productive economic activity that causes a rational allocation of goods and services within the economy.  The money is not being traded for a thing that leaves the purchaser better off today.  It is sterile economic activity, and therefore a net negative on society. 

How does one "prove" that bitcoin is a money? Given your rigid definitions you could make the argument that nothing is money by critiquing various aspects of anything that people actually choose to use as money. You ignore the history of what money is and what has been used as money. If no money is perfect then why are you biased at casting a rigid definition of money toward bitcoin and not all other forms of money that have been used throughout human history?

This is not my definition.  It's the definition of money.

Earlier you claimed that currently fiat currencies are not money and now you're claiming that the Ruble is a currency. It seems like you're either arguing semantics and trying to force things into conformity of what you feel money is based on your own personal viewpoints.

Yes. Fiats suffer from being a bad longterm store of value, the store of value being one of the three criteria for being money.  When most legal tender was in the form of commodity money, it was true money since the precious metal provided a backing.  But today fiat money is really a currency, which means that it is a medium of exchange and a unit of account but lacks a bit in the store of value department.

This is not an emotional argument on my part. It's not based on my feelings. I think you are projecting.  You seem to feel very strongly about bitcoin and when your feelings are challenged, you seem to have big emotions. 

In some sense every rational argument is an argument based in semantics. Semantics being the meaning conveyed words and language.  If we are trying to approach truth, we need to define the words we use and be precise in our arguments and speech in order to understand what is meant.  But if someone were just making emotional appeals or bullshitting, I could understand why they would feel boxed in by things like definitions.

No, contrary to what you want to believe, there is a lot of real economic activity that takes place with bitcoin. Billions of dollars of economic activity each year takes place. Merchant services like Coinbase and BitPay alone are doing multi-billion dollars in activity each year and that doesn't even account for the more open and adhoc exchange of goods and service that takes place either directly between customer and merchant or with open source merchant solutions like BTCPayServer for which there isn't much data for. Coinbase alone has over 8000 merchants using their services for selling goods. That's probably more companies than there are in a large chunk of the countries that have their own fiat currencies. If billions of real economic activity that takes place with bitcoin doesn't constitute economic activity to you, then that must mean that a large amount of the currencies on this list are not real money to you contrary to what the people might think who actually use them. Just because bitcoin doesn't have borders and there isn't an "economic center" to its usage doesn't mean there isn't any.

https://fiatmarketcap.com/

No this is not real economic activity in bitcoin or cryptos.  All of the goods and services are priced in fiat currency.  The bitcoin is converted to fiat first. Or to the extent a small handful of bartered transactions are occurring in bitcoin is based on as if the transaction were occurring in fiat.  So the fiat currency is still being used as the unit of account.

At the end of the day, you're going to have to continue to move the goalposts of your money definition in order to continue to keep bitcoin out of your definition. That seems to be a 'you' problem rather than a problem for the growing number of people every day that choose to use bitcoin.

I am not moving goal posts on the definition of money.  I think you are projecting again.  It is the bitcoin folk who are continually cooking up new justifications for continuing their mass delusion.

[HPstache]

I was wrong

It's only doubled since you started this thread...

[lifeanon269]

I am not moving goal posts on the definition of money.  I think you are projecting again.  It is the bitcoin folk who are continually cooking up new justifications for continuing their mass delusion.

My point about you moving goal posts or that you have very rigid criteria before you feel that you would consider bitcoin money is that by all measures bitcoin does meet your criteria for being money, but you won't admit it.

https://en.wikipedia.org/wiki/Money

"The main functions of money are distinguished as: a medium of exchange, a unit of account, a store of value and sometimes, a standard of deferred payment. Any item or verifiable record that fulfills these functions can be considered as money."

People are using it as a medium of exchange. People are using it as a store of value. And there are people and businesses out there pricing their goods in bitcoin and using it as a unit of account. To ignore this and continue to claim that bitcoin is not or can't be money means you're going to have to move your goalposts in your argument or engage in semantic gymnastics.

At the end of the day, bitcoin doesn't really care whether you call it money or not. It's here to stay and will continue to rise up the charts of currencies in our world.

[mjr]

And yet here we are, BTC sitting just under US$60k and millions of people achieving financial freedom with crypto by doubling, tripling or even 10x or 20x their dough.  Actually happens every day.

Yes, it's called gambling.  Even gambling can be said to be part of the economy, because it's taxed and regulated.  Not so cryptos.  It's just people passing money to each other for an asset with no instrinsic value.  I just laugh at your quoting 10x, 20x.  There's no value being added to support those gains, it ends only one way.

We're 12 years in and still waiting for it to end that one way.  Any day now right?  What if we're still going after 20 years?  When do you actually admit you were wrong and missed out on 1000000000000000000000% gains?

Ha.  So now you've gone from 10x gains to 1000000000000000000000% gains.  Bitcoin truly is magical.  Unlimited, exponential growth from a bunch of Chinese miners computing hashes.

Boy, do I look silly.